Tag s | Traditional Publishing

Every traditionally published author needs to understand the principle of “Reserves Against Returns” which is an integral part of publishing economics. It can reduce the amount of money an author receives in their royalty statement. It is usually a shock and elicits a phone call to their agent crying “What happened to my money?”

Did you realize that book publishing is the only “hard goods” industry where the product sold by the supplier to a vendor can be returned? This does not happen with electronics, clothing, shoes, handbags, cars, tires…you name it. If it is a durable good the vendor who buys it, owns it (which is why there are Outlet Malls – to sell the remaining inventory). Except for books. Somewhere along the line the publishers agreed to allow stores to return unsold inventory for credit. In one sense, publishers are selling their books on consignment. Bargain books are actually resold by the publisher (after getting returns or to reduce overprinted inventory) to a new specialty bargain bookseller or division of a chain (which buys the bargain books non-returnable).

Consequently book contracts have a clause allowing the publisher to establish “a reasonable reserve against returns.” By “reserve” they mean a pool of money withheld from the author…holding that money in “reserve.” The intention of the clause is to protect the publisher against paying the author for books that have been shipped and billed to a store but may eventually be returned to the publisher.

Imagine if Walmart purchased 10,000 copies of your book. Everyone celebrates. If you are earning $1.00 in royalty (on average) for every book sold, that means you will receive $10,000 from your publisher at some point. Hooray! Steak dinners for every one!

But wait.

What if Walmart doesn’t sell all the copies they purchased and returned 5,000 of them?

And what if your publisher had already paid you for all 10,000 sold copies? That means your publisher overpaid you by $5,000. Do you have to give that money back? You really don’t want their collections agent (his name is Guido) to come to your door to get their money back.

Instead, the publisher makes an estimate on every royalty statement and withholds a “reasonable reserve against returns.” In some situations it can seem like the publisher abuses the word “reasonable.” One author I know had 70% of their revenue withheld for a complete royalty cycle because their publisher had made a big sale to a big box chain. But is that really abuse?

The Big Box retailers are notorious for returning over half of what they purchase.

I don’t begrudge a publisher for holding a reserve. I’d rather they not demand the money back later!

But never fear! If the returns do not use up the reserve the difference is credited back to the author. Let’s watch the math in the following example:

Book sells 10,000 copies which generated $10,000 worth of author earnings in July-December. (This is assuming the author earned $1 in royalties for every book sold.)

Publisher creates a reserve of $5,000 in January in case there are returns after Christmas. This, in essence, means they hold back paying the royalties on 5,000 copies in case a truck full of that book suddenly appears at their warehouse. Meanwhile they send the author $5,000.

In Jan-June there are $3,000 worth of returns sent back which is charged against that reserve. So the publisher gives back to the author the $2,000 balance in their account.

Does this make sense? I hope so. The bottom line in this example is that the book sold 7,000 copies and the author earned $7,000.

By the way, lest you think I’m ignoring the E-elephant in the room? Ebooks technically do not have returns since there is no physical inventory on a shelf to handle. Consequently there should never be a reserve against returns on e-books. It can happen if a bunch of people return their ebook purchase, but it would be rare if it were thousands of copies.

Someone called the other day and asked, “If I’ve self-published my book and want you to consider it for representation, should I even bother sending it? Or am I toast?” I answered, “It depends.” [For you regular readers, do you think that should become the motto of the Agency?] The …

A key element in a book proposal is your sales history. Of course, you can ignore this if you’ve never published a book before. But if you have published, either with a traditional publisher or independently, your sales history must be included in your next book proposal. Here is an …

As a literary agent, not a day goes by when I don’t encounter the changes in thinking from authors caused by the expansion and availability of self-publishing. It’s understandable, because there are over twice as many books self-published every year in the United States than are published by traditional publishers. …

Ours is a process industry. Good publishing takes time. Unfortunately time is another word for “waiting.” No one really likes to wait for anything. Our instant society (everything from Twitter to a drive-thru burger) is training us to want things to happen faster. Awhile ago I wrote about how long it takes to get published which gave an honest appraisal of the time involved. Below are some of the things for which a writer must learn to wait.

Waiting for the Agent

We try our best to reply to submissions within 6-8 weeks and are relatively good about that. But if your project passes the first review stage and we are now reviewing your entire manuscript remember that reading a full manuscript is much more demanding than reading a few short proposals.

When you’re an agent, you get to see a lot of what publishers do every day. At the same time, because you don’t actually work in their offices, you don’t know a lot about what they do. Since I’ve been an agent a long time, I don’t need to write …

Each year in the U.S. more titles are published indie/self-pub than by all traditional publishers combined. Some authors publish only indie or traditional, but some entrepreneurial folks are known as “hybrid” and use whatever model works best for the situation at the moment. Many clients of the Steve Laube Agency …

The above photo is somewhat illustrative of the number of people involved in getting your book to market. Even if you self-publish there are still many functions that you may have not done yourself. Below is not an exhaustive list but a rambling stream of consciousness when thinking about the …

The discussion of indie versus traditional publishing has been bothering me lately. I know it is still a relatively new issue that everyone involved in publishing needs to sort out, but what has been bothering me is that I know I have heard this kind of discussion before and could …

Updated February 3, 2018 For a comprehensive list check out The Christian Writers Market Guide. Available in print at your favorite retailer or as an online subscription (updated weekly) at www.ChristianWritersMarketGuide.com. Our emphasis in this post is the Christian publishing industry. There are many fine commercial publishers that do not publish …